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Networks that power start-up cities

In recent years it has become apparent that entrepreneurs helping entrepreneurs in informal networks are a core component of what’s become known as a “start-up ecosystem”.1 Access to finance, talent and ideas are integral to any such ecosystem, as are the formal structures which facilitate such access, such as incubators, accelerators and co-working spaces. Entrepreneurs’ connections with their peers, however, have been shown to be as important to start-up growth in some cities as the role of institutions.2

New research from The Economist Intelligence Unit (EIU), sponsored by Info-communications Media Development Authority of Singapore, confirms that informal entrepreneur communities are instrumental to start-up success in several world cities that are known for their nurturing of innovation.

Founders of new businesses naturally rely on banks, VC funds, seed or angel investors, and sometimes government grants, for funding. They often turn to industry associations for advice on legal or regulatory conditions. Incubators and accelerators may also offer help in these areas, as well as the physical space in which to operate.

But people embarking on their first ventures don’t necessarily know how to identify and tap into these sources. They often don’t know who’s who in their ecosystem. They’re often in need of advice about their business model, the technology best suited to their circumstances and where to source it, where to recruit skilled specialists, or about marketing ‘do’s and don’ts’. Sometimes they’re just in need of encouragement to overcome the fear of failure. This is where informal networks prove their worth.

“If you don’t have an ecosystem of people you can tap into for support, to help out with, say, finding talent or just making contacts, it’s 20-30 times harder to get your business off the ground.”

– Bryce Keane, co-founder, 3beards (London)

What do informal networks look like?

Entrepreneurs have always connected with their peers, whether in ancient agoras, medieval guilds or Renaissance coffee houses. But leaps in digital capabilities – particularly the Internet and mobile technology – have led to the formation of new types of entrepreneur communities and energised grass-roots networking activities.

Indeed, many such communities today reside online. Entrepreneurs are avid digital networkers. Over half the participants in our survey are hooked into entrepreneur-oriented social networking groups on global platforms such as LinkedIn, Facebook or WhatsApp, and most of these people participate in multiple groups. Just over one-third also connect with other entrepreneurs in locally oriented online groups.

Other communities focus on in-person networking. These activities – which are mobilised through digital channels – frequently take place in an informal setting. In London, for example, Shoreditch bars are popular venues for get-togethers of technology entrepreneurs. In New York, they may meet each other at cocktails hosted by a university alumni association. In Singapore it may be “hackerspaces” which bring together technology innovators, or university departments – even individual professors – who invite their alumni to get-togethers along with other industry contacts.

“If I want to find out something that I need to get done or to get or make an introduction to someone new, my natural tendency is to meet over a coffee or a beer. That’s the first step.”

– Rob Findlay, founder, NextBank; SVP, DBS (Singapore)

The online and face-to-face communities appear to play different roles as forums for support. The online space, according to Alice Bentinck, co-founder of Entrepreneur First, a London-based accelerator, is where practical issues are typically addressed, such as recruiting challenges, finding office space, or understanding specific health and safety regulations. For higher level inputs, she says, such as advice on one’s business model or marketing strategies – or alternatively for making useful contacts or simply sharing war stories – nothing can replace the face-to-face environment.

Hybrid communities

In a start-up ecosystem, online and offline networks and activities are complementary rather than competing sources of support. So too are informal and formal communities. Accelerators, for example, focus on developing select groups of start-ups in highly structured programmes of finite duration, sometimes in return for equity. But many accelerators, recognising the value of peer advice and experience-sharing, also facilitate informal networking events involving the wider community of entrepreneurs. According to Patricia Lahy-Engel, director of The Hive by Gvahim, a Tel Aviv-based accelerator, these also serve the purpose of recruiting new participants.

Informal, unstructured networking activities require dedicated teams working in structures to organise them. In many cases, what started five or seven years ago as small groups of volunteer event planners with day jobs are today larger not-for-profit (and sometimes commercial) organisations whose mission is to facilitate entrepreneurial communities. Examples include Startup Grind, which launched its maiden Silicon Valley chapter in 2010 but now supports communities in 180 cities around the world. Another is 3beards, the facilitators of Silicon Drinkabout, which began in London in 2011 as a Friday night get-together for tech-sector entrepreneurs. Local affiliates now run weekly “drinkabouts” in 17 cities on different continents.

Large or small, highly organised or ad hoc, such facilitators share the common objective of creating spaces, virtual and physical, where entrepreneurs connect with each other on their own terms to solve problems, offer moral support and ultimately to help each other grow.

Where do such communities thrive? The EIU has researched 10 cities that enjoy a reputation as centres of innovation in one form or another. Informal and formal entrepreneur networks co-exist in all of them, but their relative importance varies considerably from one to another. The types of support such communities are good at providing also differ across each city.

1. A prominent elucidation of the concept was advanced by Compass – formerly Startup Genome – a research group which has published an annual Startup Ecosystem Ranking since 2012.

2. See, for example, The Power of Entrepreneur Networks, a study of New York City’s start-up scene published by Endeavor Insight in 2014.